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6 questions about Anthem buying CIGNA

Health giant Anthem, headquartered in Indianapolis, markets health plans under the BlueCross BlueShield brand in 14 states across the country. Last week, the company announced that it is acquiring CIGNA, headquartered in Bloomfield, Conn.

Health giant Anthem, headquartered in Indianapolis, markets health plans under the BlueCross BlueShield brand in 14 states across the country. Last week, the company announced that it is acquiring CIGNA, headquartered in Bloomfield, Conn., in a $54 billion deal expected to close in the second half of 2016. Anthem’s announcement came on the heels of reports that Aetna, another large health care company, would be acquiring Humana. If both deals go through, the United States will be dominated by three major insurers: Anthem, UnitedHealthcare and Aetna.

Following are the answers to six key questions about Anthem’s acquisition.

1. What is causing this?

Among other causes, the insurers are citing new requirements of the Affordable Care Act as a key reason for pursuing the acquisition. Those in favor of this merger also reference the need to spread technology investments across a larger business and the need to combat the market power generated by medical providers merging with each other.

2. What impact will this have on my BlueCross BlueShield of Tennessee coverage?

The acquisition does not impact your BlueCross BlueShield of Tennessee (BCBST) coverage. BCBST shares a brand identity with Anthem as a fellow member of the BlueCross BlueShield Association. They are, however, completely different companies.

3. When I travel to other states, I have access to the BCBST network in those states. How can that be if many of the insurers using the BCBST brand are actually different companies?

Many employers have team members in multiple states. The different insurance companies that make up the BlueCross BlueShield Association knew they needed to partner together in order to compete with national carriers such as UnitedHealthcare.

Partly as a result of that, a feature of many BCBST plans is that a member can utilize the best BlueCross BlueShield network in any state.

Logistically, this means that all of the different BlueCross BlueShield plans have to work closely together to coordinate claims payments behind-the-scenes in a manner that appears as seamless as possible to the member.

4. OK, so Anthem owns BlueCross BlueShield plans in 14 states that work closely with BCBST in processing claims. But now Anthem will also own CIGNA, which is a big competitor of BCBST. Could this get complicated?

It is certainly possible. Once BCBST is competing directly with Anthem in the commercial segment, some have speculated that it could become hesitant to share claims and pricing data. Part of the reason for this hesitancy might be the idea that Anthem would theoretically be able to share this competitive pricing data with CIGNA, which could use it to compete more effectively in Tennessee. One would imagine that this has been considered and that there are plans to address it.

5. Are there other instances where Anthem and BCBST compete?

Yes, although not in the commercial segment. The two companies directly compete in the Medicaid segment, where both BCBST and Amerigroup have contracts with the state of Tennessee. Amerigoup is owned by Anthem.

The difference there, though, is that Anthem does not necessarily receive data by nature of its back-office partnership with BCBST that would give its Amerigroup business a leg up in competing for Medicaid business against BCBST.

6. Bottom line: Is this good or bad for the health care consumer in Tennessee?

If the acquisition goes through as planned in the latter half of 2016, CIGNA will become part of a much larger entity. To the extent that Anthem identifies Tennessee as an important market and channels more resources to CIGNA in Tennessee, it could mean that BCBST now has a stronger competitor than it had before. More competition could mean lower prices.

Bear in mind, however, that BCBST is a high-quality organization that has been competing effectively against larger national carriers for a long time. UnitedHealthcare, for example, is the largest insurance company in the country. While the company is certainly an important insurer in Tennessee, its presence has not kept BCBST from maintaining majority market share here for years. As the health care industry moves from five major players to three, it’ll be interesting to see how these shake-ups affect competition in regional and state markets

Alex Tolbert is the founder of Bernard Health, a company that provides expert advice on health, Medicare and COBRA insurance and medical bill consulting. To learn more, visit www.bernardhealth.com.